Is The Hard Market Here To Stay?
The basis of all business can be condensed down into the concept of supply and demand. It’s quite simple, really; you have what I want, and I have what you want. Both parties engage in an exchange and, voila, there is business.
There has been a lot of talk in the insurance industry lately, though, that there is currently a hard market in place. In fact, we have weighed in on this ourselves – with our market outlook of 2019 and the subsequent mid-year follow up.
So, what is a hard market? In short, it is when supply and demand are in a state of dissonance. There is a high demand yet the supply just isn’t there. That is what is currently happening in the insurance industry – a high demand for coverage with a shockingly low amount of insurers willing to provide said coverage.
Why, then, is this? There are a couple of reasons.
Firstly, insurance agencies are paying out a record number in claims which has led to the lowest levels of profitability in the last 20 odd years. Moreover, this situation has created fears regarding an elevated insolvency risk; all in all, it is a dire situation at its surface.
Yet, the insurance industry has gone through hard markets before and come out on the other end even stronger. So is there really anything to worry about? Is this just another temporary setback?
It turns out the answer to that question may be scarier than we’d like to think. The second reason for this hard market, and perhaps the most important one, is that there has been a technological shift – and it may be one that stays prevalent for time to come.
In short, the biggest contributor to the state of the current market is data. Insurance has always been a data-based industry; except data has never been this readily available with this level of access before.
Technological advancements – as well as the rise of AI – has meant that insurers now have an abundance of data at their fingertips almost instantly. Using this data, agencies have become more hard-lined and impatient. Whenever a pattern of losses seems to emerge, these agencies switch themselves out immediately.
In turn, this causes issues for brokers and the people they are trying to help get coverage. One of the biggest concerns at present is the cancellation of contracts. More than half the brokers across the nation, according to a poll that will be published in August by Canadian Underwriter, have experienced contract cancellations due to the nature of this market.
Taking a client who has had a contract cancelled to another carrier, though, can be even more challenging because of the apprehension around loss rations.
As it turns out, some insurers don’t believe this is a hard-market at all. Monica Ningen, the CEO of Swiss Re Canada, stated that “I don’t personally know if I would call it a hard market … what I would call it is pricing coming back up to something that is a long-term sustainable level.”
That, then, seems to be the reality of the market. It’s a game of insurance chess between brokers and insurers – with the right balance being struck the ultimate goal as each keep the other in check. Rest assured, at Hubbard, we will continue the good fight in the name of the client.
To learn more about how you can navigate these murky waters, contact one of our licensed brokers now at
Source: Canadian Underwriter